Are Resource Conflicts on the Indonesia-PNG Border Inevitable?

It was interesting to read in last week’s Jakarta Post that the Indonesian Government has voiced its concern about Papua New Guinea’s burgeoning mineral exploration and production capabilities. More specifically, the concern raised was focused on the proximity of a number of PNG energy and mineral projects which are being developed close to the Indonesian – PNG Border.

Mr. Widjajono Partowidagdo, Indonesia’s Deputy Minister for Energy and Mineral Resources, voiced his concern after satellite photos showed that Papua Province had huge oil and gas reserves – and that very little progress had been made over the past 22 years to develop the area due to various constraints.

He went on to say:

“Moreover, there are [oil and gas] blocks located on the border area with Papua New Guinea. That country started production activities in blocks located on the border area long ago. If we don’t move fast, our oil reserves can be absorbed intentionally or unintentionally by them.”

The largest of these oil and gas blocks spread across both sides of the border is the Warim PSC which covers about 9,480 square miles (on the Indonesian side). The Warim PSC was signed in May 1987, and is owned by US-based ConocoPhillips (80%) and Santos (20%). ConocoPhillips is the Operator of the block but has been restricted in developing the area due to the Indonesian Government declaring the area a protected forest reserve in 1989 – a roadblock which will be adjusted in the nearby future.

What’s interesting for Indonesia and PNG is that there are corporates who currently have commercial interests on both sides of the border. For example, Santos has non-operating interests in PNG – these include the PNG LNG Project (17.7%) and Hides field, and oil production from SE Gobe. Santos also has operated interests in the undeveloped Barikewa gas field.

Accusations and examples of neighboring states stealing each others resources aren’t new. Saddam Hussein’s decision to attack Kuwait was based on the premise that Kuwait was stealing Iraqi oil through slant drilling. Resource conflicts have dominated much of Africa’s recent past history; and more recently, the South Ossetia War has once again highlighted the high demand the world holds oil and gas in, and the extent nations will go to in order to protect their interests.

The Indonesian Deputy Minister’s observation is one worth taking note of – and one which PNG’s recently appointed Ambassador to Indonesia, Commodore Peter Ilau, should be wary of.